Cigarette smuggling has cost South Africa about R466-million in lost excise and customs duties and VAT between 2002 and 2004.
Since April this year, about 18-million cigarettes valued at more than R12-million have been confiscated by anti-smuggling officials, says the South African Revenue Services (SARS).
The tax agency recently embarked on an ongoing enforcement campaign to raise awareness among consumers and businesses, boosting public consciousness regarding the impact of smuggling and counterfeit goods on the economy.
The campaign is supported by the Consumer Goods Council of South Africa (CGCSA).
SARS spokesperson Tasneem Carrim said the focus was on industries where their business intelligence research indicated the presence of illegal activity.
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“The campaign focuses on industries like tobacco, alcohol, textiles, footwear, sweets as well as confectioneries, cellphones and others. SARS aims to curb transgressions and the avoidance of excise duties and other related taxes in various industries.”
As part of the campaign, Enforcement, Post-Clearance Inspection and Anti-Smuggling members raided 16 bottle stores and eight manufacturers in Gauteng during the last week of November in which more than 100 cases of suspected illicit liquor were seized. The officials also confiscated cartons of suspected counterfeit cigarettes and sealed off a warehouse containing 84 ethanol and fermentation drums for further inspection.
In a similar raid on 54 bottle stores in Durban last month, 2 193 cases of white spirits were seized. This haul was valued at R450 000 in lost revenue.
Carrim said cigarettes were most commonly smuggled in containers and trucks with false compartments.
Of particular concern were incidents of so-called round tripping, where locally manufactured cigarettes were exported and thus exempted from duties and taxes. These goods then found their way back into South Africa.
She said “ghost exports” were also uncovered by SARS inspectors who found that empty containers, or containers with items other than the goods listed, were exported to neighbouring countries. The containers were returned to South Africa and re-entered the domestic market with tobacco products for which duties and taxes had not been paid.
CGCSA legal and regulatory affairs manager Nick Tselentis said illegally manufactured or smuggled cigarettes constituted a threat to the legitimate activity in the industry.
“Illegal imported or counterfeit tobacco products can normally be distinguished by the relative low selling price to consumers. In some instances a packet of 20 cigarettes is sold in the informal market for as little as R6 to R7,” he said.
“In most of these cases taxes and duties have been circumvented, the product was introduced into the market illegally or the traders were unable to provide proof of origin.”
He said that within the sugar confectionery industry, economic trends had shown that imports were increasing faster than industry turnaround, with the decrease in local production directly linked to this. This had a negative impact on the economy.
Undervalued imports, done by double invoicing and false declarations, are also a problem, he said.
- This article was originally published on page 2 of Pretoria News on December 23, 2005
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